Week 31, 2021—Issue #163
7 Powers: Strategy, Statics, and Dynamics
Each week: three ideas on how to make work better. This week: three ideas on the nature of business strategy.
Hamilton Helmer’s 7 Powers — The Foundation of Business Strategy (2016) has become a prerequisite reading for tech entrepreneurs. Testimonials from luminaries abound and it’s easy to see why: Helmer’s framework is “simple but not simplistic” with lots of practical implications.
Let’s dig in.
1. Strategy
A power is “a set of conditions that creates the potential for persistent differential returns”. There are seven such powers to choose from (see above), and companies must choose at least one in order to maximize fundamental business value. In this context, Helmer defines “Strategy”(capital “S”) as the study of how powers create value.
2. Statics
Helmer goes on to suggest that “Strategy” (again, capital “S”) be separated into two topics. The first is “Statics” which he defines as the study of how having power creates value. Examples from Netflix, Intel, and others help to illustrate the ideas with appendices providing mathematical support. In this context, Helmer defines value as “[Market Size] * [Power]”.
3. Dynamics
The second topic is “Dynamics”, defined as the study of how companies go about getting power. This is where “strategy” (lowercase “s”) enters the picture, defined as “a route to continuing Power in significant markets.” In short, companies must continuously sense and respond to opportunities to invent their route to Power.
The 7 Powers provide plenty of practical guidance for how and when to pursue what power, etcetera. And there’s real value in that. But to me, it’s the framework itself that I find most intriguing. Helmer writes:
To the best of my knowledge the seven Power types…are the only strategies available to a company. If you do not have at least one of these for each competitor (current and potential, direct and functional), you cannot satisfy The Mantra and hence are lacking a viable strategy.
Put another way, the 7 Powers are mutually exclusive, collectively exhaustive (MECE, see #122). It’s supposedly the only strategy framework you need. So read the book. It’ll be time and money well spent.
That’s all for this week. Until next time: make it matter.
/Andreas
PS. If you want more information about the Power types themselves, check out Florent Crivello’s Mind the Moat, a 7 Powers Review.
